Friedrich von Wieser, or: Against “Sidelining” Austrian Economists

Historians of economics must resist the temptation to put their narratives into the service of ideology. The intriguing case of Friedrich von Wieser exemplifies the grave dangers involved for history of economics as a discipline and for Austrian economics as a respectable research program – but it also provides hints on how to immunize historical accounts from the dangers of hagiography and litmus-test purity checks.

Along with his brother-in-law Eugen von Böhm-Bawerk, both born 1851, Wieser formed the core of the second generation of what slowly emerged as the “Austrian” or “Viennese” School during the 1880s and 1890s. There are at least five roles along which Wieser’s relevance might be reconsidered: 1) the social scientist; 2) the school erector; 3) the idea synthesizer; 4) the teacher; 5) the connector to other research programs. Focusing on these five dimensions in the next sections helps to understand why in 1918 Wieser was considered at the very center of the School, while the concluding sections suggest why in 2018 his contributions have largely fallen into oblivion.

To begin with, Wieser made important theoretical contributions of his own, building upon the foundations of the Mengerian enterprise. While Böhm-Bawerk expanded Menger’s subjectivism to the sphere of capital and interest, Wieser proceeded in a different direction and developed in his Prague period (1884–1903) a complex production and cost theory, with key insights in the role of prices, calculation, and entrepreneurship for economic systems. He coined the terms “opportunity cost” and “marginal utility” which before had been only pre-formulated in lengthy Mengerian definitions. His move to Menger’s Chair at Vienna in 1903 marked a shift in his focus: away from technical economics to economic sociology, focusing especially on power phenomena, which occupied him until his passing in 1926.

Especially during his Prague period, Wieser played a crucial role in erecting and solidifying the Austrian School – well beyond Vienna. While Menger initiated the Methodenstreit in 1883, it was primarily Böhm-Bawerk and Wieser who waged the numerous “battles with the Prussians” from the Younger Historical School around Gustav Schmoller. As the debates spread well beyond the German-speaking area, Böhm-Bawerk and Wieser were among the first to publish in the newly established economics journals in the Anglo-Saxon world in the 1890s, most notably the “Quarterly Journal of Economics” and the “Economic Journal”.

Wieser was a curious blender of ideas. While certainly sympathetic to liberalism, his ideational set included also strands often considered irreconcilable: conservatism and progressivism, revolutionary and evolutionary social dynamics, individualism and collectivism, elitist and democratic notions. He was also part the Viennese Zeitgeist, expressed anti-Semitic and Pan-Germanist sentiments, accompanied with love and later nostalgia for his Empire in decline.

Teaching achievements certainly rank among Wieser’s significant merits. Apart from educating entire generations of social scientists at the two most important universities of the Empire, Wieser was also formative for a number of later “stars”, most notably Schumpeter and Hayek. His aforementioned contributions from the 1880 and 1890s on the role of prices, calculation, and entrepreneurship were of utmost importance in Schumpeter’s and Hayek’s scholarly socializations, providing cornerstones for their own notions.

Finally, Wieser was the nexus to other research programs, both in his Prague period’s technical economics and in his Vienna period’s economic sociology. In the former, his production and cost theory formed an intellectual bridge to marginal utility varieties elsewhere, especially to the emerging Lausanne School of Walras and Pareto. In the latter, the combination of his two focuses, on utility theory and on power phenomena, made Wieser the natural choice for Germany’s hub in the social sciences, Max Weber, when deciding who should contribute the volume on economic theory to Weber’s gigantic encyclopedia project “Outline of Social Economics”.

And yet, Wieser is seldom discussed in the burgeoning literature on Austrian economics and on the history of the School. While it is certainly possible that his ideas may be classified as less path-breaking than Menger’s or Böhm-Bawerk’s – the “measuring of giants” is not a serious technique in history of economics anyway – there is also a peculiar reason for this development. For the past 20 years, a strand of historiography has been initiated by some authors of the Ludwig von Mises Institute which constructs a vision of the Austrian School as consisting of a “mainline” and “sidelines”. Wieser, Schumpeter, Hayek or Israel Kirzner have been squeezed into the “sidelines”, while the “mainline” extends from Menger over Mises and Murray Rothbard to the constructors of this model.

The history of the Austrian School is not only uniquely long as compared to other living traditions of economics. It is also uniquely rich, consisting of a variety of currents, as well as of curious in-betweens connecting it to adjacent research programs. If this plenty is to be fruitfully explored for the further development of the currently extremely vivid Austrian research program, models of intellectual dynasties or of litmus-test purity checks as to “who is an Austrian” and who not anymore are harmful, to say the least. To a neutral observer from the economics profession, the martial rhetoric of “knights” invokes associations of Marxist sects waging wars against each other and searching for the “true heir” of the Great Master.

A counter-proposal could be: explore the intellectual plenty of the tradition and study figures like Wieser to better understand the genuine “value added” of the innovations by stars like Schumpeter or Hayek vis-à-vis the notion of the earlier generations. Present the persons as living figures with all their flaws and faults – since it is only saints to whom hagiographies are dedicated. And above all: please do not forget that history is far too fascinating and too delicate to put it into the service of ideology.

[…] at ThinkMarkets, Stefan Kolev provides an excellent summary of Friedrich von Wieser’s career and contributions to Austrian economics. Wieser and his brother-in-law Eugen von Böhm-Bawerk formed the second generation of the […]

[…] at ThinkMarkets, Stefan Kolev provides an excellent summary of Friedrich von Wieser’s career and contributions to Austrian economics. Wieser and his brother-in-law Eugen von Böhm-Bawerk formed the second generation of the […]

[…] for the valuable comments by Peter Klein and Joseph Salerno at the Ludwig von Mises Institute to my previous post on Friedrich von Wieser and the historiography of the Austrian School. Some lines of clarification […]